The National Council for Applied Economic Research on Thursday said that the Indian economy is poised to grow by 7.1 per cent this year, 0.4 per cent more than its earlier projection, though agricultural and industrial growth is expected to decelerate.

In its latest quarterly review, the NCAER, also said fiscal deficit, which was earlier pegged at 5.3 per cent, was expected to be 4.18 per cent this year.

Justifying the upward revision, NCAER said there were two important aspects which could change the prospects – exports improvement and investment increase -- in 2004-05.

"2004-05 has begun on a strong platform for growth and if the rate of growth of private investment increases from 11.8 per cent to 14.5 per cent in nominal terms, GDP growth could reach 7.1 per cent this year," the review said.

The economic think-tank had earlier in its Macro Track said the economy was poised to grow by 6.7 per cent this year due to a slowdown in agriculture, industry and services sectors.

The latest review projected that agriculture would grow at 3 per cent in 2004-05 against the estimated 10.7 per cent for 2003-04.

"This contraction in agricultural growth as compared to 2003-04 would lead to a reduction in the growth of demand as well. This would also have an impact on industry and services growth," it said.

NCAER said that industrial sector was likely to be 'buoyant' with 6.84-7.37 per cent growth during this year as compared to its estimate of 7.4 per cent for 2003-04.

Services sector growth was expected to be 8.35-8.94 per cent during this year, it said.

On the price level, NCAER said inflation is likely to be 4.3 per cent this fiscal.

Exports were expected to tick 14 per cent growth, while imports would grow at 15 per cent in dollar terms in 2004-05. "The trade balance with the stronger rupee would lead to a deficit of 2.2 per cent of GDP," it said.

The economic think-tank had projected a trade deficit of 1.13 per cent for 2003-04.

NCAER also expected foreign direct investment to grow by 4.0 per cent.

Public investments were expected to continue to record 10 per cent growth during this year also, while growth from private sector was expected to be 11.77-14.5 per cent.

However, the share of public investments in GDP was likely to dip to 5.36-6.01 per cent this year compared to the estimate of 6.1 per cent for 2003-04.

In the case of private investment, its share was expected to marginally go up to 16.65 per cent of GDP in 2004-05 as against the projection of 16.5 per cent for the previous fiscal.